Fluor Reports Sharply Higher Earnings
Citing growth in its engineering and construction business--particularly overseas--Fluor Corp. reported earnings Thursday of $108.5 million for fiscal 1989, up 92.4% from net income of $56.4 million last year.
The strong earnings punctuated Fluor’s continuing three-year recovery since it began a painful restructuring and turned away from the oil and minerals business. The Irvine-based company’s revenue for the year ended Oct. 31 was $6.23 billion, up 21.4% from 1988’s $5.13 billion.
For the fourth quarter, the company, the largest publicly held firm based in Orange County, reported earnings of $29.1 million on revenue of $1.67 billion, compared to earnings of $23.6 million on revenue of $1.61 billion a year ago.
Industry analysts said Fluor’s performance was on target with expectations. Wall Street reacted favorably to the earnings report, as Fluor’s stock closed up $1.25 at $33.625 a share on the New York Stock Exchange.
David S. Tappan Jr., who is stepping down as Fluor’s chief executive next month, said the company’s engineering and construction business did well, as did its coal and lead investments. He also attributed the company’s financial growth to a 44% expansion of its international business, which accounted for $2 billion of the company’s $8.4-billion backlog of orders as of Oct. 31.
“We are naturally pleased with our earnings progress last year but we still have a long way to go to produce the superior results we are capable of delivering,” Tappan said in an interview Thursday. “I think Fluor Daniel’s (the company’s main operating unit) market strength and geographical diversification makes us very confident that we’ve only scratched the surface of the growth and earnings potential that lies ahead of us.”
Leslie G. McCraw, Fluor’s president who is being promoted to chief executive in January and will succeed Tappan as Fluor chairman in 1991, is taking the reins at Fluor at a time when analysts predict its fortunes are on the upswing.
“I think McCraw is taking over at a time when the momentum at the company is very, very strong. The backlog and the profit margins are still rising,” said Mark Altman, a securities analyst with Paine Webber in New York.
Industry analysts expect Fluor to achieve greater profitability in 1990. Altman said he believes the company will generate net annual income of $150 million and Alan Dorsey, a securities analyst with Dillon, Read & Co., said he expects the company will generate net income of between $160 million and $165 million.
Tappan said that with the prospects good for an extended growth cycle, the company will be investing in development and training of engineering and construction personnel and in computerized engineering and internal communications systems.
Tappan, 67, postponed his retirement for two years to preside over the restructuring of Fluor. In 1985 and 1986, Fluor suffered heavy losses due to an ill-timed investment in the minerals business and a dive in oil prices that killed demand for the large petrochemical projects that were then Fluor’s main source of revenue.
